CHOICE: Retailers And Distributors Must "Pass On The Savings"

CHOICE, a consumer watchdog, has hit out at the retail mark up of goods in Australia, with specific reference to the cost of video games, considering the strength of the Aussie dollar - and has posted a submission to the Productivity Commission encouraging retailers to pass on the savings to consumers.

"Australian consumers are able to save about 90% on the price of Portal 2 for Xbox 360 and PlayStation 3 if they purchase the game from Play-asia.com rather than Dicksmith.com.au," read the submission. "Even with a delivery fee of US$15.40 for FedEx (which includes tracking and insurance), there are still significant savings to be made."

Late last year the Productivity Commission was asked to look at the retail situation, as a result of dramatic increases in imports of goods, in response to retailers concerns. But it looks like this move may end up backfiring, as the commission looks at the structure of retail, and the ways in which it has to change according to the ease with which consumers can now import.

"In our Submission to the Productivity Commission, lodged today," said CHOICE, on their website, "CHOICE calls on importers, distributors and retailers to pass some of the savings they are enjoying thanks to the strong Aussie dollar on to Australian consumers. We are already seeing the results of their failing to do so – a massive uptick in Australian consumers shopping on overseas websites.

"Who can blame them when Xbox 360 and PlayStation 3 games, for instance, cost 91% more from a major Australian online retailer than from an overseas online website based in Asia? Or when a pair of Nike running shoes cost $240 at a major Australian sports retailer while the same product can be bought online for $134 from a US sports store?"

Strong words. But Christopher Zinn, CHOICE director of campaigns and communications, took it a step further, claiming that the rapid increase of Australians buying goods overseas was more than justified.

“The pressure from overseas online competition is a much needed wake up for Australian retailers to be more competitive," he said. "We need to move beyond a complacent culture of high prices, high margins and poor service."

We have written extensively about the price of video games in this country. While we support the local industry, the fact of the matter is, more and more gamers are finding it easier and cheaper to buy games from overseas.

It's a complicated situation, with retailers claiming that cost price of goods is too high, and publishers pleading poverty when it comes to shipping and distributing costs. But where are the savings going? That is the question. Clearly the Australian dollar is sitting pretty, so savings must be occurring at some point in the retail chain - where is this money going, and why aren't consumers seeing the benefit of it?

That's the million dollar question.

Comments

The only thing we can do is not to buy from Australian retailers. If enough people do it, they'll get the message, but if you keep paying for someone to kick you in the teeth then they're obviously going to continue to kick you in the teeth.

(And try not to buy preowned games either, that makes the problem worse AND hurts game developers.)

We have to remember. Its not the retailers, its the local publisher/distributor.

Take the CLASSIC of Witcher 2. Made by CDPROJECT, sold digitally by GOG (a subsidiary) and finally distributor NAMCO Bandai AU.

The developer/retailer were happy to sell @ $50 to Aussies, but the Distributor (NAMCO Bandai) pushed the price up for local retail and consequently required that the digital price be increased in response.

That may be the case but to me it suggests that those stores should be pushing against the distributors more.

It would also make sense.

If it cost 40US and they sell for 50. The same 4/5ths of the price logic is probably applied to us. IF RRP went down properly the price that they would sell to would as well.

Distributors in australia have to be making a killing and one would think that instead of jacking the online price in some locations(normally drawing attention to the fact it is cheaper overseas) they would sell more unit's if the prices here were reasonable

That may be the case but to me it suggests that those stores should be pushing against the distributors more.

It would also make sense.

If it cost 40US and they sell for 50. The same 4/5ths of the price logic is probably applied to us. IF RRP went down properly the price that they would sell to would as well.

Distributors in australia have to be making a killing and one would think that instead of jacking the online price in some locations(normally drawing attention to the fact it is cheaper overseas) they would sell more unit's if the prices here were reasonable

Can the not so large retailers really push against the publishers?
The publishers know that gamers want games...they'll just pi$$ off the smaller retailers and the larger will pick up the extra demand.
???

from when i used to work for Game, most costs prices were around $75-80, so when they're selling at $109.95, that's a fairly high margin, but when they price match or choose to sell @ $79/$89 they're not making much at all.

Not true. Even for a 100% region locked console such as the Wii or the 3DS, we have the luck of sharing a region with a lot of other PAL nations. As such, sites such as 365games.co.uk or Ozgameshop.com.au still offer games for these consoles drastically below the price they are here.

I'm not sure they'll ever be able to beat online for price. 50 brick and mortar stores with people in them cost a lot more than one warehouse full of servers with an attached office building for the staff.
Not a direct relation but I wonder what the in store differences are between Oz and the USAdians? I imagine the cost of staff is lower over there from some of the stories I hear about their dismal, soul crushing, minimum wage levels.

I'm pretty sure the hourly wage in Australian stores (I worked at Game myself) was from $15 - $25 (not including working on Sundays which was time and a half), and was based on the employee's age and whether they worked full time, part time or were a casual(gender was probably counted as well). Apparently store upkeep (electricity bills and the sort), was maintained from the money received from warranties and pre-owned sales, but I'm not a hundred percent on that.

I have a friend who's a store manager over in the states, and he only gets $15 an hour if I recall.

You guys know that it's publishers, not retailers, that set the regional prices in Australia right?

If Activision decides to sell Black Ops PS3 to the Australian market at $85 a copy, you can't expect australian retailers to swallow that $25 difference over US RRP just for fun. And any retailer who does take that bullet for the consumer isn't going to be in business for long.

I have heard that in response to this it is possible to buy a game on Steam from the US region and then gift it to an Aus account, therefore getting around the higher costs. If this is true does anyone know if it is possible to do from Aus, or do you need someone in the US to help you out on the other end, and is there any group that provides this as a service?

I'm not sure if I should feel like I'm doing something illegal or immoral if I was to do this, but I guess it is basically the same as 'importing' a game.

I agree. Don't blame the retailers. If they have to pay the distributer $75 for a new game (numbers are out of my arse, but you get the idea) then they're not going to cut the price to $60 to compete with Ozgameshop. The publishers set a price and the retailers have to be able to pay their employees, rent etc.

EB should take the rap for selling secondhand copies for almost full price 2 years after the game was released, but that's an entirely seperate issue.

I find it silly if not ironic that we can buy games online for less than cost price that retailers are paying. If the system would allow for it they could buy their games from ozgameshop and then tack on an extra $5 or $10 to make a profit and still come in less than what they are selling games for at the moment.

I think there are tariffs and trade embargoes currently preventing this.

There was an article a year or two back that discussed this issue with regards to books, and retailers weren't able to compete with Amazon, because the government was all about protecting the livelihoods of the middle men...

Yeah, it's the parallel import restrictions. They removed them from CDs years ago - the price of CDs came down, and it didn't bring about the end of the Australian music industry like the music companies threatened it would.

There was an attempt to do the same with books a year or so back. That attempt failed after the politicians got sucked in by claims that dropping the restrictions would destroy the Australian publishing industry. Since then we've seen Borders and Angus & Robertson pretty much go out of business (I think they still have a couple of stores over on the east coast). So once the rest of the Australian book retailing sector goes under thanks to Amazon etc, I wonder who will be left to sell Australian-published books?

I'm not sure if Australia has similar parallel import restrictions on games. Can anybody out there confirm one way or the other?

I'd have to say that JB Hi-Fi is probably the best major retailer when it comes to fair pricing. Their games are hardly ever full RRP, unlike EB and as games get older they often get lower in price too. Still not perfect, just better than most.

I work for a small videogame retailer in the ACT. I would love to sell games cheaper. But putting the blame squarely on retailers is unfair. I can't speak for some of the larger stores but my cost on something like Portal 2 is $85 Australian from my distributor, and that's before I add a cent to the price for my margin. Its my opinion that the blame lies more in that direction than the retailers. Unless all retail stores were to start grey importing, the prices are not going to drop locally unless the Australian distributors start to drop their prices.

By grey importing he means bringing it in himself and not buying from the official Australian distributer. If he is buying the game for $85 from the distributer then he would make more money if he bought it from ozgameshop and then onsold it.

Stuff that has been imported legally through some non-official channel. e.g. http://www.mwave.com.au/gaming.asp?status=new - L.A. Noire brand new for $70 at a store within Australia? I'm guessing that wasn't purchased from a local distributor.

I wonder about this as well. It sort of feels like there is something wrong in doing this rather than going through the official distributor, but I don't see what. So long as the goods aren't specifically sold with the condition 'not for resale' it seems like this would be an honest way to make a living, undercutting the retailers that aren't smart enough to do this themselves.

I'm sure there are risks and a lot more organising involved in buying from an overseas distributor but if it is the only way to make your business then do it. Not only would you hopefully lower your prices but I think consumers would appreciate it a lot more.

Grey imports are Parallel Imports. They are stock that is imported direct by the retailer rather than going through local distribution channels.
The big difference is you lose out on no "manufacturers" waranties (most retailers will have their own though) and some other local schemes like cash back offers as these are Managed by the local distributor. O

I use a Parallel importer for Camera products and they have some info on it on their FAQ pages. Keep in mind these statements are (obviously) from the point of view of a Parallel importer.

Yeah, but seriously - how many times have you ever actually made a warranty claim on a game? Hardware maybe, but software?

I don't think I've returned a game for being faulty since the days when I used to buy Commodore 64 games on cassette tape and half the time they wouldn't load. Don't think I had a problem after I got the 5.25" floppy drive add on for it, and haven't had a problem with any floppy disc, cartridge, CD, DVD or BluRay based media since.

It does seem like a ripe market perfect for the taking. I actually have a mate that wants to get into the importing business, bringing stuff over from China. I wonder if I can convince him to give games a go, though they'd have to be PS3 due to region encoding.

Parallel importation of video games is entirely legal for both consumers and retailers. Retailers can buy from overseas distributors rather than local all they want. It's called parallel importation. There is absolutely nothing illegal or 'grey market' about it. Hell, the whole point of the relaxation of laws barring or restricting parallel importation is to drive down local prices by introducing competition based in cheaper markets.

The problem with Australia is that the majority of retailers, for reasons that completely escape me, fail to do so. I've heard rumors to the effect of local distributors refusing to do any business whatsoever with retailers who import even a small portion of stock.

ACC law specifically prohibits refusal to sell to a customer unless they have another potential supplier - Its a restriction in trade. The problem is they could say you buy one overseas, you buy all...

Choice are retarded at best.
Play Asia vs DSE.
Sure sounds like a level playing field.
I would like to see what the overheads are for the two companies, what the staff earns, and their entitlements.
What expectations their respective shareholders have etc..
If Choice is going to highlight this very real problem for ALL Aus retail, then they need to make sure they don’t undermine themselves with such poor comparisons.
Pick a similar company with similar overheads and expectations.

It's not compared to DSE though, it compared to the DSE online branch. You could argue they share the burden on the physical locations, but for the customer the service is identical. If DSE can't drop the price at this point, there is something seriously wrong with their business model.

From a consumer perspective, they are similar. They're websites that you can purchase games through. The overheads don't come into the argument because the issue is the cost to the purchaser at the end of the chain.

The fact of the matter is that an individual can purchase a game from overseas for less than a retailer can purchase from a distributor. Somewhere along the way, something has gone wrong if that's the case and it has very little to do with how much rent a store pays or how much the employees earn.

Read the full report, Bob. They talk at length about the factors impacting retail and conclude that the majority of complaints made by retailers to justify higher prices at retail compared to overseas are bunk, and that many b&m stores fail to leverage their biggest advantage: staff.

I personally think it's local distributors who are taking advantage of our retaillers - I don't think the retaillers are scooping up fat profits, unless they're importing themselves (which might be why JB Hi-fi can sell new games like LA Noire for $78 at launch and EB Games can happily price match them...)

In any case, we're all pretty well sick of it. The fact that the consumer watchdog is lashing out at the retaillers to do something about it only encourages me to import more goods until they do - now is the time that it's critical we apply pressure with our wallets.

This is a really interesting topic, to me, and not just in videogame terms. I am actually from the US, so I am kinda familiar with how it is being a consumer over there, I've also had long conversations with my parents about it to compare experiences.

Given that retail is a business with no other goal than money making, its understandable that we're in the position that we're in at the moment. Australia is an island, culturally as well as geographically, which has put itself in the position of relying on importation very early on. The US is obviously very import-heavy now, but at least to begin with, many of the consumer product companies were American in origin.

Here in Australia though, companies like Harvey Norman in particular hold the island population to ransom. One of the things my mum said amazed her when we first moved was the idea that stores would regularly run out of stock of things, something she'd never really experienced in the US. Combine this genuinely limited stock with the kind of spike and slash price sales the big retailers routinely use, and you have a situation where the retailers are creating the feeling in consumers that they will 'miss out' on a good price or the product entirely, if they don't rush out and buy NOW. Whereas in the US I get the feeling that retailers and manufacturers produce and supply anything and everything they think MIGHT sell (which has its own set of problems) in Australia the onus seems to be more on the consumer to buy whatever the retailers feel like bringing to the market, whenever they feel like doing it.

Has anyone followed the fashion label Zara opening its new store here in Sydney, and the media describing it as 'damaging' to our "local" labels like David Jones and Myer? Or the new Costco opening in Auburn (Sydney - there's one in Melbourne already)? Or again the obvious Harvey Norman QQ about online shopping in general. There's this idea that the way it is now, the stores and brands that are here already are the ones that SHOULD be here, because... they're Australian? because they are the status quo? I don't find anything particularly worthy in the Australian-ness of either Myer, David Jones or Harvey Norman. They are all poor imitations of the American and English department stores anyway. Similarly with Woolworths and Coles, I'd much rather shop somewhere that is willing to work to keep my business, rather than where I'm "supposed" to shop because I'm a true-blue fair dinkum Aussie (which I'm not).

Gerry Harvey is a dinosaur, a 1950s travelling vacuum cleaner salesman that's somehow still in business. He relies on an uninformed and isolated market to manipulate to his advantage. Anything that empowers consumers is damaging to his business model, so he is opposed to it. I see absolutely no reason to preserve him or his business, at my expense. I refuse to subsidise his out-of-date business practices. Using Harvey here as an example, there are other businesses who do the same - he's just too perfect a case not to pick on him.

I'm not in a position to name and shame importers here, but I suspect the largest stores in Australia in many areas are also their own importers. They were able to dominate the market because of that advantage. I know for a fact that Billy Hyde Music is a subsidiary (or is owned by the same company, not sure there) as one of the primary musical instrument importers. So if a competitor retailer wants to sell a given brand of guitars, they effectively buy it from a competing retailer, to then sell in their own shop. How is that fair? I'd be really interested in doing some research on the paths a few given videogames travel from developer to retail shelf, to find where the increases in price take place. I've done a little, but just am not in a position to get the nitty gritty details.

Nationalism is one thing, which in general cultural terms I can accept. Loyalty or dedication to a culture (let's say one of fairness, equality, liberty, individualism etc) does not equate to a loyalty to a brand name. Brand-names are not nations.

Using nationalism to force loyalty to something that ISN'T positive is ridiculous, and it has been time and again. Kinda like religion. But hey let's you and me not get started on that in this thread! :P

I think there are a few comments in there that some might see as being fairly negative on Australia and could take offense at, but I can see that isn't your intention and you are simply telling it how you see it.

And I have to say I agree

I personally have never felt a compulsion to buy from our local stores because it is an Australian thing to do but I can certainly see that being promoted to others. I am happy to buy from overseas brands, isn't the mingling of their goods with ours a part of having an open market. If they are undercutting Australian retailers then Australian retailers need to find a way to adapt to that.

I would think the retail industry would be in a constant state of flux with new businesses, suppliers, systems all coming and going. To not welcome that is to set out to fail.

I also agree that the idea of a business selling a product as well as being the sole importer of said product is broken. But this should just be more motivation for businesses to import the products themselves rather than buy it from their competitors, like we were talking about the grey importing higher up.

That's just the thing though: The fact that certain retail brands in Australia have broken supply chains has nothing to do with their Australianness. I'd be happy as Larry (see what I did there? an Aussie idiom!) to buy from an Australian store that had good prices.

Justifying bad business with an appeal to patriotism is disingenuous and is hurting more Australians (the public) than it is helping (a few very very rich business owner/operators).

If we got an amazon.com.au, we'd also get Australian prices on things like books. And by Australian prices, I mean the current, stupidly high local RRP rather than lower US, UK or CA rates we currently enjoy when purchasing from Amazon. Parallel importation of books for retailers is, in most cases, illegal.

Seriously... f♥ck the retailers, They themselves should know that the basis to shopping is to find the best bargains and lately, the bargains are online. the sooner everyone buys stuff online the sooner retailers will realise that to compete they have to drop their prices a bit.

I wouldn't worry about upsetting people with censoring, I think most will understand why it is done and it is a better system to lightly censor them like this than to disallow them altogether. Sometimes only explicit words can truly express meaning.

You know, there's 1 Australian retailer who's smart enough to import their copies of PS3 games from the US, slap on an Aussie rating sticker and then mark them up to local prices. Who's that you ask? Gametraders. I purchased Heavy Rain from their store, but unfortunately for them they didn't research that the DLC was region locked... So they had to exchange it for a local copy some 5 months after I'd purchased it.
I'm sure retailers know how much cheaper games are online, but why aren't we seeing it?
As gamers though, we run the risk of what happened to me; import a game but not knowing if the DLC might be region locked.
Sony 1st party games have come down to a new $109.95 price point apparently, so thats a start I guess? If only we had it as sweet as yanks, who complain about their prices, and buy games at $59...

After chatting with some friends who have run small stores there is definitely a larger issue with local wholesale prices.
JB tend to be cheaper because they can strike bulk deals with distributors that force out the competition - I knew someone who used to run an anime/manga store who said she only dealt with imports because Madman's wholesale for small retailers was higher than the retail JB could offer because of the disparity in the wholesale pricing! (and as much as I would like to support another friend who runs a book shop, a RRP of $140 with a wholesale around $72+ for a series of graphic novels can't compete with a $55 preorder or $75 regular price from online)

I've also heard there might be some sort of parity tax that prevents retailers from passing on savings as well - but someone more familiar with retail taxes would need to confirm if that's the case.

It's becoming ridiculous when anyone who subscribes to the Ozgameshop newsletter sees that most of the high profile new releases are available for about a third of the local retail price! (I enjoyed Brink, and it was likely in part to costing only $32 to preorder instead of $90!)

I'm an accountant although i haven't had much to do with import/export, but i do know that if you are importing a commercial quantity that you have to pay GST before customs will release the shipment. But that is still only 10% to your cost base.

+ duty.
Everyone seems to forget that a commerical reseller has to pay DUTY as well as GST when importing. And it's not cheap. On top of the greed of capitalism, this is the next main thing that's gouging

We pay staff in Australia twice what they pay them in the US or Europe and triple what they do in Asia.

So a publisher carrying an Australian office has loads more wages overhead to absorb in the price it sells to the retialers for. It has a much more expensive distribution cost for those goods to get them to retailers also.

The retailer then has a higher cost to market so needs to sell at a higher margin than an overseas company. In general our freight costs more as well around the country.

Couple the above with the extremely high $USD and it is the perfect time for us to buy imported cheaper games , it makes much more commercial sense. But , go back to the days when our dollar was low and we wouldnt as consumers have this luxury.

So stop whinging about it , start abusing it while it lasts.

People in Europe and US are paying the same end price for games when it is relative to their incoming wages as we are here in Australia. They may pay $50 for a game but they earn $400 a week for a job here that pays $800 a week , so a game costing $100 here is the same.

I wish I could remember the forum I saw it on, but someone was countering the same argument by pointing out that even with the higher wages, when you factor in the cost of living and amount we get taxed over here we still come out worse, though by a smaller margin than usually claimed. (they had a link to a website that had run the numbers, maybe someone can link it here if they know the one they were talking about)

We're also penalised for being a tiny market share in the big scheme of things. If I can save money by not buying Australian I will. It's not like we're talking a few dollars here. We're talking savings of $50 a game. And I don't know about you guys but I buy a lot of games.

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